Kremlin power struggle fear as economic development minister Alexei Ulyukayev is arrested

Roland Oliphant

A Russian minister has denied charges of corruption after his overnight arrest sent shockwaves through the Russian elite and sparked speculation of a power struggle inside the Kremlin.

Alexei Ulyukayev, the minister of economic development, was charged with soliciting a $2 million cash bribe to facilitate the controversial sale of an oil company involving a key ally of Vladimir Putin last month.

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Mr Ulyukayev denied his guilt and called his arrest a "provocation" when he appeared in Moscow's Basmanny district court yesterday.

"I am determined to cooperate with the investigation as much as possible. I request more lenient measures of restraint," the minister said at a hearing to determine whether he should be remanded in custody. The judge ordered Mr Ulyukayev to be placed under house arrest and wear an electronic tag after officials argued he was a flight risk.

Mr Putin fired Mr Ulyukayev as a minister in a decree published late Tuesday night.

Officers from the Investigative Committee, the country's top detective agency, and the Federal Security Service (FSB), the successor to the KGB, swooped on Mr Ulyukayev "in the act" of receiving the bribe money at 2.30am.

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Investigators claim he attempted to extort the bribe from Rosneft, a state-owned oil company, in exchange for backing the company's bid for the government's stake in Bashneft, a regional oil producer.

Mr Ulyukayev is the first serving minister to be arrested since Lavrenty Beria, Stalin's feared secret police chief, was detained and shot in a power struggle following the dictator's death in 1953. His arrest has sparked alarm that a similar power struggle may now be unfolding in Mr Putin's Kremlin.

Mr Ulyukayev, who has served in the government since 2000 and held his current post since 2013, is considered a liberal figure who has opposed an increasing state presence in the economy.

Alexei Ulyukayev, the arrested former economic development minister. Photo: Supplied

He and a number of other figures associated with Dmitry Medvedev, the prime minister and a bitter rival of Mr Sechin, initially opposed Rosneft's involvement in the Bashneft tender, saying it was wrong for a state-owned company to take part in a privatisation drive.

The resulting political struggle saw the government suspend the privatisation in August. Rosneft won the auction for 50.01 per cent of the company with a $US5 billion bid when the tender was finally held last month.

A spokesman for Mr Putin said the Russian president had been aware of the case "from the start of the investigative operations". A spokesman for Mr Medvedev said the prime minister had also been kept abreast of events.